Long term implications of delayed climate action

Author

Ashwini Arulrajhan

Introduction

Climate change poses a significant threat to global economic stability, with potential to cause unprecedented GDP losses worldwide. As countries grapple with the challenge of transitioning to low-carbon economies, the timing of these actions becomes critically important. Delayed climate action, characterized by postponed implementation of mitigation policies and reliance on current policies, may result in severe economic repercussions. In contrast, proactive scenarios, such as achieving Net Zero emissions by 2050, promise to mitigate these risks through early and decisive action. This research aims to investigate the long-term economic implications of delayed climate action, specifically comparing the Delayed Transition scenario with more proactive approaches like the Net Zero 2050 scenario. By exploring variations in different countries, this study seeks to highlight the cost of inaction and the economic benefits of timely climate policy implementation.

Main Research Question

What are the long-term economic implications of the Delayed Transition scenario in comparison to more proactive scenarios like Net Zero 2050, and how do these implications vary across different countries?

Data

The research will utilize data from the Network for Greening the Financial System (NGFS) Phase 4 Scenario Explorer, which includes projections based on seven climate scenarios with varying levels of physical and transition risk. These scenarios are constructed using integrated assessment models (IAMs) such as GCAM, MESSAGEix-GLOBIOM, and REMIND-MAgPIE, providing a comprehensive view of potential future pathways. Country-level data on GDP, population, energy consumption, and carbon taxes, derived from the IAM output, will serve as a primary input for the analysis. The study will focus on results available for three scenarios: Net Zero 2050, Delayed Transition, and Current Policies, allowing for a comparative analysis of economic outcomes under different climate action timelines.

Source: https://climatedata.imf.org/pages/ngfs#ngfs7

Methodology

The methodology will involve a comparative analysis of the economic outcomes associated with the Delayed Transition scenario versus the Net Zero 2050 scenario, across a range of countries. The analysis will quantify potential national income losses from climate risks and the benefits of avoided climate damages. GDP losses and benefits will be calculated using simple damage functions and the methodology provided by the NGFS, which estimates damages based on temperature outcomes inferred from emissions trajectories.

Questions:

  1. Which countries are the winners and losers
  2. Try to map the winners and losers
  3. Tie it to current investment flows into these countries
  4. Real investments into ESG? (very low tracking error)